Will Mac Sales Go Up?

Apple’s inventory management position is stronger than either Windows OEMs or Microsoft. Apple can better manage inventory, while cutting costs and more firmly controlling margins, because:

• Approaching half of Apple sales are direct, whether online or through its retail stores. Apple is closer to customers, particularly those shopping stores, which allows it to better gauge what’s selling where, or not much at all.

• The company stores are as much about marketing as sales. Apple controls the customer experience, unlike Windows OEMs who must rely solely on retailers like Best Buy (Sony is the exception because it operates company stores, too). The Apple stores provide a cohesive and unified Mac lifestyle buying experience and important customer service through the Genius Bar.

• Apple puts together the hardware and supplies the software; iLife and Mac OS X costs have already been amortised as part of research and development. Windows OEMs buy the software, starting with the operating system; Microsoft and other developers get smaller licensing revenue when fewer PCs ship into the channel.

• Apple offers a surprisingly clean and uncomplicated product line. There aren’t dozens of PC configurations with confusing numeric names. Production is easier (and cheaper) to manage, and products and their benefits are easier to market.

During this global economic earthquake, PC companies will have to better manage production and distribution. Apple’s in a strong position to manage costs and anticipate sales declines. Of course, that’s not enough. Apple must also sell products, and that’s going to be tougher with spending down but Mac prices still way up there above PCs.

I’ve been rethinking this one. I’m not as caustic to Apple pricing as I used to be. One reason: Apple stores typically are always busy. I can hang around for 30 minutes and watch those newly purchased MacBooks and MacBook Pros go out the door. Somebody still has money to spend. My point: Apple should hold steady notebook prices longer if possible. I’m changing my position on that. The desktop PC is a declining business for everybody; it’s where Apple could and should cut prices first. Gartner predicts that desktop PC sales will plummet 31.9 percent this year.

Sell iPhone as the Better Netbook
Interestingly, Gartner forecasts that notebook sales will climb 2.7 percent year over year. Growth shows there’s still strong enough demand for people to spend more if necessary to get the right portable. That said, cheap and small portables are in demand. When mininotebooks are added in to Gartner’s estimates, portable shipment growth jumps more than three times to 9 percent. That’s a market where Apple doesn’t compete today. Or does it?

Right now mininotebook sales are strongest in Europe, where many are sold subsidised by wireless carriers. Buyers pay less for the hardware, when making contractual commitments for data services. The business model is very similar to cell phones.

Many people are calling on Apple to release a Mac netbook, which I think is a bad idea. I do believe that Apple should compete in the mininotebook market, but by moving up from iPhone rather than down from Macs. It’s a better branding and pricing approach.

For example, a souped-up iPhone, perhaps with a keyboard, would fit nicely with the mininotebook business model and offer Apple wannabe customers a lower-cost option – all without cannibalising Mac PC branding and pricing. But that would mean waiting for another product release cycle, which isn’t necessary. Apple should go after the mininotebook market right now, with iPhone. Europe is the place to push hardest first.

The mininotebook and iPhone are both carrier subsidised with 3G data plan commitments. In the US, PC data plans typically cost about twice those for iPhone, and many also have onerous data caps. So iPhone data plans are cheaper by the month, whether looking at monthly or data overage fees.

Many subscribers will spend less on iPhone than for subsidised mininotebooks. Granted, the computers have larger displays, keyboards or bulkier storage. Not iPhone. But based on my own netbook experience, many users will find the smaller portables aren’t replacements for notebooks. The way I see it, that doesn’t make them much better, if at all, than iPhone. The majority of netbooks run Windows XP Home. Need I say more about the operating system compared with iPhone OS?

I see few downsides to Apple using iPhone to go after mininotebook sales. Netbooks are less than you want, but iPhone is more than you need. It’s the perfect PC complement most mininotebook shoppers are looking for. The device costs less; the data plans cost less; the phone is always with you; App Store cheaply extends iPhone’s value, etc. As I asked in October: Will your next PC be a smartphone, eh, iPhone?

In the US, the arguments are less compelling because most mininotebooks are sold without 3G contracts. But manufacturers are now building in the radios. If it’s a choice between 30 and 60 quid a month for data, isn’t less more appealing?

I haven’t seen any new “Get a Mac” commercials for a while. Has Apple suspended or retired the campaign? I would love to see a Get a Mac commercial where PC (as Vista) tries to squeeze into a netbook but can’t. Mac miniaturises, and he’s inside iPhone.